In Nigeria, trust has been the original credit score for centuries. From market traders offering ‘pay later’ on garri to Fouani’s ‘Bankers Pay Small Small,’ informal BNPL has thrived not on algorithms, but on community ties. Yet today, as Klarna and Afterpay dominate globally, Nigeria’s formal BNPL sector struggles to scale. Why? The answer lies in three gaps: identity, data, and repayment. Solve these, and Nigeria’s $50B credit gap could become fintech’s golden opportunity.
The familiar tale of deferred payments
In the bustling markets of Nigeria, the concept of “Buy Now, Pay Later” (BNPL) is not new. It is embedded in our daily transactions, be it collecting garri with a promise to pay later or my mother allowing patrons to eat at her restaurant and settle the bill another day. This informal credit system, rooted in trust and community relationships, has long been a cornerstone of our commerce.
The villain: A persistent credit gap
Despite this ingrained culture, Nigeria faces a significant credit gap. Only 6 percent of the adult population accessed credit products from regulated financial institutions in 2023 (Veriv Africa). The total credit gap is estimated at ₦24.2 trillion (RiskSeal). This shortfall hampers economic growth and limits opportunities for many Nigerians.
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The hero: BNPL, a modern solution with deep roots
BNPL has evolved globally, with platforms like Klarna and Afterpay leading the charge. In Africa, the BNPL market is projected to grow from $15.5 billion in 2024 to $33 billion by 2029 (BusinessDay). In Nigeria, companies like Easybuy, Checkout by Credit Direct, CD care, and CredPal are adapting BNPL models to fit local contexts. Easybuy, for instance, has partnered with retail outlets to offer BNPL options, recognising the predominantly offline nature of Nigerian commerce and the importance of agent interactions.
“This informal credit system, rooted in trust and community relationships, has long been a cornerstone of our commerce.”
Opportunities
• $1.2B Market: Nigeria’s BNPL transactions will triple by 2027 (TechCabal Insights).
• Offline-First Tech: Voice-enabled apps for illiterate traders, QR-based guarantor systems.
• Government Levers: Link BVN to land registries—a farmer’s plot could collateralise a phone loan.
Challenges in the BNPL landscape
1. Identification issues
• While progress has been made with systems like the Bank Verification Number (BVN), BVN-NIN integration remains incomplete. There’s a need for a unified database that integrates BVN with national ID systems, ensuring real-time updates and biometric verification. An example: Ifueko’s marital name change isn’t synced across databases. NIMC, CBN, and banks must sync IDs in real-time. Brazil’s Pix system merged CPF tax IDs in 6 months, Nigeria can too.
2. Limited data for credit assessment
• 60 percent of Nigerian adults lack credit histories (CBN, 2023). Traditional credit assessments rely heavily on bank statements, which may not provide a complete picture. 83 percent of lenders rely on single-bank statements (EFInA, 2022), ignoring 70 percent of Nigerians who multi-bank or trade informally. Bisi’s loyalty across three banks is invisible. Alternative data sources such as rental records, telecom usage, and utility payments can offer a more comprehensive view of a borrower’s behaviour and creditworthiness (RiskSeal). While it is still early days, the open banking push to banks by CBN is essential for growth.
3. Default chaos
• Loan defaults remain a concern; consumer loan defaults hover at 35 percent (NDIC, 2023). In Q4 2024, lenders experienced higher default rates across all lending types (Arise TV). Card-based repayments are not a sustainable model. Implementing effective repayment mechanisms, like direct debit tied to BVN, and extending the Central Bank’s Global Standing Instruction (GSI) to include microfinance banks and finance houses, can mitigate this issue.
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A path forward
To harness the full potential of BNPL in Nigeria
• Leverage Alternative Data: Incorporating non-traditional data sources can enhance credit assessments and expand access to credit for underserved populations. CredPal now analyses telco top-ups and utility payments, critical for the 40 percent unbanked.
• Strengthen Regulatory Frameworks: Extending GSI to all financial institutions and establishing consequence management for defaulters can improve repayment rates and lender confidence. Consequence Deficit policy is essential, as can be seen in Ghana’s where their credit bureau blocks SIM cards for debtors.
• Promote Financial Inclusion: With formal financial inclusion at 64 percent in 2023 (A2F), there’s room for growth. BNPL can serve as a bridge, bringing more Nigerians into the formal financial system.
Conclusion: Embracing a hybrid model
Nigeria’s rich history of informal credit systems provides a unique foundation for BNPL. By blending traditional practices with modern fintech solutions, we can create a robust, inclusive, and sustainable credit ecosystem that empowers individuals and drives economic growth. Regulators, sync our IDs. Lenders, see the full picture. Borrowers, own your records “The tools exist: BVN, NIN, payment systems, and a culture built on ‘pay small small.’ Now, fintechs must weaponise trust, not with Silicon Valley playbooks, but with algorithms that speak Hausa, Yoruba, and market pidgin.
Faith Ojeiku is an embedded finance enthusiast.
